In August, 11 cities dropped off the list while Atlantic City and Ocean City, N.J., were added to the list that includes, as of August, 247 metropolitan areas.
The index called the Improving Markets Index, lists metropolitan areas that have shown six consecutive months of improvements in employment, housing prices and housing permits.
The 247 cities that made it to the list in August is eight fewer than July's list, but "is approximately three times the number of metros that qualified for the list in August 2012," the trade group said in a statement.
"In all, 244 metros that were listed as improving in July retained that status in August, and this is an encouraging sign of the continuing housing recovery," NAHB Chairman Rick Judson said in a statement.
"That said, we know that the pace of improvement is being hampered somewhat by challenges that builders and buyers are experiencing with regard to the availability of credit, materials, lots for development and labor," he said.
"Even with the small decline in the IMI this month, close to 70 percent of all U.S. metros are represented, and the geographic distribution of entrants continues to be very widespread," said Kurt Pfotenhauer, vice chairman of First American Title Insurance Co.
"These facts should be reassuring to today's prospective homebuyers," he said.